Copper futures rally to a five-month high

Gold prices weaken, track oil lower despite strength in other metals

PolyaLesova

SAN FRANCISCO (MarketWatch) -- Copper futures climbed more than 4% Tuesday to close at their highest level in five months, piggybacking on growing global demand and concerns over falling supplies.

At the same time, gold futures finished lower in a volatile session on the New York Mercantile Exchange, with traders tracking weakness in the oil market and shrugging off strength in other metals.

On the London Metal Exchange, copper prices traded well above the 200-day moving average around the $6,900 mark and closed at $6,970, according to Martin Hayes, an analyst at BaseMetals.com.

"This triggered systems-based CTA [Commodity Trader Advisor] buying today, with fundamental support seen from falling inventories and expectations of increased consumption in the seasonally strong second quarter, notably from China," he said in e-mailed comments.

Against this backdrop, copper for May delivery climbed as high as $3.3175 a pound in Nymex trading. The contract closed at its highest level since Nov. 9, up 4.3%, or 13.55 cents, at $3.3145 a pound.

And on the Nymex, copper supplies fell 52 short tons to stand at 36,386 short tons as of late Monday.

Gold pulls back

Also in metals, June gold declined by $1.80 to close at $669.70 an ounce in New York, after reaching a high of $673.20 as traders remained focused on developments surrounding standoff between Iran and the U.K. over the fate of 15 sailors and marines in Iranian custody.

"Gold is (all) about individual investors," said Jon Nadler, an analyst at Kitco.com. "Their worry-barometer is just not sufficiently high right now and it also keeps being variable, at best."

"About the only possible comfort for gold may come from a strong copper market, as some analysts take its movements to be a leading indicator for subsequent bullion movements," he said in e-mailed commentary.

And "for the moment, dips are still being viewed as a good buying opportunity, a theme likely to continue as we approach the wedding/monsoon season in India," said James Moore, a metals analyst at TheBullionDesk.com.

In a note to clients, he called "encouraging" the emergence of technical support around the $656 chart line.

However, "with the market still largely long, there remains the risk of a deeper correction short-term," Moore said.

On Monday, June gold had closed at $671.50, up $2.50, after trading as low as $661.70.

Eyes on crude

Movements in the price of crude oil also filtered into metals trading. Crude for May delivery closed 2% lower with tensions between Iran and the U.K. easing slightly.

"Several conciliatory verbal overtures have been made by both sides and the impasse could now conclude without further ado," said Nadler. See Futures Movers.

Also on Nymex, other metals prices gained ground along with copper. May silver climbed 8 cents to close at $13.43 an ounce, while June palladium added $2.05 to end at $355.75 an ounce and July platinum rose $3.30 to close at $1,252.30 an ounce.

On the supply side, gold warehouse stocks were unchanged at 7.58 million troy ounces as of late Monday, according to Nymex data. Silver supplies rose 90,698 troy ounces to stand at 125.8 million troy ounces.

In equities, indexes tracking the performance of stocks in the metals and mining sector rose, tracking strength in copper Tuesday.

The Amex Gold Bugs Index
HUI, -1.26%
added 1.2% to close at 349.41 points, while CBOE Gold Index
GOX, -0.56%
rose 1.5% to end at 147.26 points and the Philadelphia Gold and Silver Index
XAU, -1.30%
gained 1.3% to close at 141.12 points.

As for sector exchange-traded funds, the StreetTracks Gold Trust ETF
GLD, +0.10%
finished unchanged at $65.85, the iShares Silver Trust ETF
SLV, +0.50%
added 0.5% to close at $133.07 and the Market Vectors-Gold Miners ETF
GDX, -1.05%
tacked on 0.8% to close at $40.48.

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